WB urges more local financing resources

WB urges more local financing resources

JAKARTA (JP): World Bank managing director Sven Strom urged
Indonesia on Tuesday to seek additional domestic resources to
finance the 2000/2001 state budget and not count on additional
loans from the bank.

He said the bank would assist the government in "finding ways"
to secure more domestic financing resources.

"This includes additional resources from privatization
programs and other means," he said after attending a meeting
between the government and representatives of Indonesia's major
donors, which are grouped under the Consultative Group on
Indonesia (CGI).

The CGI donor grouping, which is under the chairmanship of the
World Bank, will convene on July 27 in Paris for two days of
talks to decide on a new loan commitment for the crisis-hit
country.

Several government officials have said recently Indonesia
might not be able to obtain loan commitments of the same amount
as last year's pledge because the World Bank and the Asian
Development Bank had a heavy loan exposure to the country.

But Strom said the bank was able to provide Indonesia with a
similar loan commitment to previous years -- about US$1.5 billion
each year.

"But the question is, is it necessary or not.

"The important thing is how to help Indonesia in increasing
domestic resources," he said.

Indonesia received $7.9 billion from CGI last year.

Deputy for international cooperation at the National
Development Planning Board (Bappenas) Budhy Tjahjati said last
week the multilateral and bilateral donors had indicated they
might provide $4.72 billion in new loan commitments. He said the
commitments included $1.5 billion from the World Bank and $1.2
billion from the ADB at the upcoming CGI meeting. But she said
the figure was an initial estimate only from preliminary talks
with the lenders.

Separately, chairman of Bappenas Boediono said on Tuesday that
among the issues to be discussed at the upcoming CGI meeting
would be efforts on how to finance the 2000/2001 state budget.

He said talks would focus on how to maximize tax revenue,
generate revenue from privatization, minimize subsidies and the
recovery of nonperforming loans (NPLs) and other assets under the
Indonesian Bank Restructuring Agency (IBRA).

Boediono said the matter of whether Indonesia needed to
request another sovereign debt rescheduling facility under the
auspices of the Paris Club of creditor nations would also be
addressed.

"The understanding and support of CGI on how to bridge the
financing gap is very important. The 2000/2001 state budget is
expected to be difficult due to the heavy burden of the bank
recapitalization costs," Boediono said.

Strom concurred, saying the recovery of NPLs and the sale of
other assets under IBRA would therefore be very important in
meeting the recapitalization costs.

IBRA is currently in control of approximately Rp 600 trillion
in various assets, including some Rp 230 trillion in NPLs
transferred from the country's major banks, particularly those
which joined the government-sponsored bank recapitalization
program. The agency plans to sell the assets, restructure the
NPLs, or take litigation measures against bad debtors.

Strom said the donors had urged the country to speed up the
bank and corporate restructuring programs.

"There was agreement that while the reforms, and a peaceful
election, seem to have signaled a return of confidence, and with
it, signs of recovery, that situation remains fragile. The reform
program needs to be continued, and in some cases sped up."

Strom said Indonesia's major political leaders, including
presidential hopeful Megawati Soekarnoputri, agreed on the need
to speed up the reform program.

He also said there was a need to speed up anticorruption
programs.

Several non-governmental organizations (NGOs) earlier called
on the government and the World Bank to delay the upcoming CGI
meeting until Indonesia had formed a new government. The NGOs
also criticized both the government and the bank for not
seriously tackling rampant corruption in the country.

However, the government and the World Bank have both said the
CGI meeting will go ahead as scheduled.

The country held an election on June 7 to elect new
representatives to the People's Consultative Assembly (MPR).

Coordinating Minister for Economy, Finance and Industry
Ginandjar Kartasasmita said ahead of a limited Cabinet meeting
that new loan commitments from the donors would help further
strengthen confidence in the economy.

Sources said most of the $10.3 billion foreign loans needed
for the 1999/2000 fiscal year ending next March were secured,
with the government needing only about $1.9 billion more to fill
the financing gap. (rei/prb)